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A new type of product claim is emerging in the Australian class action market; one which has been part of the US class action landscape for many years. Unlike previous product class actions where the safety of the product was typically in issue, the new product claims focus on statements/representations made in the marketing of the product, and whether or not the statements/representations contravene the misleading and deceptive conduct provisions of the Australian Consumer Law.

The Nurofen class action

The most high profile example of this new breed of class action is the Nurofen class action. The Nurofen class action is in its early stages and “piggy backs” off the successful ACCC action, in which Reckitt Benckiser, the makers of Nurofen, was fined $6 million for making representations on its website and product packaging that Nurofen Specific Pain products were each formulated to specifically treat a particular type of pain, when this was not the case.

While Reckitt Benckiser has admitted that the representations were misleading (in line with the ACCC action), they are contesting whether any damage was caused by these representations. The plaintiffs’ case is that damage arose because – but for the misleading representations – the plaintiffs would not have bought the Nurofen Specific Pain products but would have instead purchased cheaper pain relief products.

Non-class action marketing cases

“Marketing” cases outside of the class action context are nothing new in Australia. For decades, government regulators (such as the ACCC and more recently, ASIC) have been taking companies to court in relation to marketing which they consider falls foul of the misleading and deceptive conduct laws. Companies have also used the misleading and deceptive conduct laws to directly take on their competitors in relation to their marketing campaigns.

However, the use of the class action forum for “marketing” cases represents a new dimension in this type of case. The class action forum significantly alters the strategic and legal issues which need to be addressed in marketing cases.

First, the strategies used in class actions will affect the strategy for prosecuting and defending claims of misleading and deceptive marketing. For example, a class action defendant may challenge whether such actions are appropriate to proceed as class actions: in particular, whether there is a common issue to be decided for all group members, or on the basis that the cost to the defendant of identifying the group members and distributing any amounts to be paid would be excessive.

Second, there are legal issues which typically play little or no role in “marketing” cases which are now critical to the success of “marketing” class actions. For example, in the class action forum it is now critical to be able to prove that the allegedly misleading marketing caused damage (“causation”) and then to be able to quantify that damage. This is because the primary purpose of a class action is to recover a damages sum for group members. It’s also how litigation funders make their money out of class actions, assuming litigation funding can be obtained for such actions.

By contrast, in an ACCC action or competitor action for allegedly misleading marketing, the main focus is on stopping the marketing and not on proving and quantifying damage. It is generally recognised in such actions that proving and quantifying damage will be a complex and complicated exercise, and potentially impossible.

Other marketing class actions

There are also marketing class actions threatened in relation to other products. Many of these again seek to “piggy back” off successful ACCC actions or to “piggy back” off overseas class action judgments or settlements. For example, one class action law firm is currently calling for group members for a class action against Bet365 in relation to their “Free Bets” online betting campaign. In the ACCC action, Bet 365 was fined $2.75 million in relation to its “$200 FREE BETS FOR NEW CUSTOMERS” offer to customers in Australia. The Court held that this marketing campaign was misleading and deceptive because there were a number of restrictions and limitations that applied to the offer that were not brought to the customer’s attention. The aim of the threatened class action is again to recover the damages and losses said to have been suffered by group members.

The number and scope of this new breed of class action is yet to be seen. Although many of these claims may result in relatively low damages payouts/settlement sums compared to class actions in the product liability or financial contexts, the applicants’ legal costs and defence costs (both of which could potentially be borne by insurers) will be as significant as in other types of class actions. The reputational consequences for insured companies and their products will also be considerable.

Given the proliferation of such class actions in the United States, it is likely that this will be a growth area for class actions – and consequently, for insurers – in Australia.

This article was first published on the Norton Rose Fulbright blog Insurance Law Tomorrow and has been reproduced with permission.

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